Question

Job order cost accounting for a service company

The law firm of Furlan and Benson accumulates costs associated with individual cases, using a job order cost system. The following transactions occurred during July:

July 3.	Charged 500 hours of professional (lawyer) time at a rate of $180 per hour to the Obsidian Co. breech of contract suit to prepare for the trial
10.	Reimbursed travel costs to employees for depositions related to the Obsidian case, $16,800
14.	Charged 150 hours of professional time for the Obsidian trial at a rate of $270 per hour
18.	Received invoice from consultants Wadsley and Harden for $51,100 for expert testimony related to the Obsidian trial
27.	Applied office overhead at a rate of $75 per professional hour charged to the Obsidian case
31.	Paid administrative and support salaries of $34,600 for the month
31.	Used office supplies for the month, $11,700
31.	Paid professional salaries of $189,300 for the month
31.	Billed Obsidian $281,400 for successful defense of the case

a. Provide the journal entries for each of these transactions.

July 3
July 10
July 14
July 18
July 27
July 31 Admin. sal.
July 31 Supplies
July 31 Prof. sal.
July 31 Billed
July 31 Cost

b. How much office overhead is over- or underapplied? Enter your answer as a positive number.
$  

c. Determine the gross profit on the Obsidian case, assuming that over- or underapplied office overhead is closed monthly to cost of services.
$

Answer 1

Date	General Journal				Debit	Credit
3-Jul	Work in process				90000
	Salaries payable					90,000
10-Jul	Work in process				16,800
	cash					16,800
14-Jul	Work in process				40500
	Salaries payable					40,500
18-Jul	work in process				51,100
	Consultant fees payable					51,100
27-Jul	Work in process				48750
	office overhead					48,750
31-Jul	office overhead				34,600
	Cash					34,600
31-Jul	office overhead				11,700
	Supplies					11,700
31-Jul	Salaries payable				189,300
	cash					189,300
31-Jul	Accounts receivable				281,400
	Fees earned					281,400
31-Jul	Cost of services				247,150
	work in process					249,000
b)	office overhead over applied				2,450
c)	Gross profit				31,800